Depression's Bill

Last week the House of Representatives gagged and gulped on the largest peacetime tax bill in U. S. history. For the first time the Congress was getting an unpalatable dose of the Depression as it affected Government finances.

To balance next year's budget and absorb an estimated deficit of $1,241,000,000 the House Ways & Means Committee had drafted, without politics or partisanship, a bill to raise by taxation $1,096,000,000 above current receipts. To make up the difference the committee anticipated a $125,000,000 cut in Government expenses and a $25,000,000 increase in postal income. If all worked well, which it rarely does, the Treasury would squeak through 1933 with $5,000,000 to spare. The new or increased taxes before the House and the estimated revenue from each were:

2 1/4% on manufacturers' sales $595,000,000

Individual incomes 112,000,000

Corporation incomes 21,000,000

Estates and gifts 35,000,000

Admissions 90,000,000

Stock transfers 28,000,000

Lubricating oil (4 cents per gal.) 25,000,000

Malt, wort, grape concentrates 50,000,000

Communications 35,000,000

Imported oil and gasoline 5,000,000

Administrative loopholes plugged 100,000,000

$1,096,000,000

The normal income tax rate was upped from 1 1/2%, 3% and 5% to 2%, 4% and 6%. Exemptions were reduced from $3,500 to $2,500 for married persons, from $1,500 to $1,000 for single. The 25% credit on earned income up to $30,000 was reduced to 12 1/2% on incomes up to $12,000. The surtax rate which now stops at 20% was stepped up much faster to 40% on incomes of more than $100,000 per year. What a married man with no dependents would have to pay was set forth in the following table by the Ways & Means Committee:

Net Income Tax under 1928 Act Tax Proposed

$ 3,000 $0 $4.50

4,000 3.63 20.00

5,000 16.88 37.50

6,000 28.13 55.00

7,000 39.38 72.50

8,000 56.25 100.00

9,000 78.75 135.00

10,000 101.25 170.00

12,000 168.75 260.00

14,000 258.75 420.00

16,000 363.75 600.00

18,000 483.75 800.00

20,000 618.75 1,020.00

22,000 768.75 1,260.00

24,000 933.75 1,520.00

26,000 1,113.75 1,800.00

28,000 1,293.75 2,100.00

30,000 1,488.75 2,420.00

35,000 2,168.75 3,310.00

40,000 2,908.75 4,320.00

45,000 3,718.75 5,460.00

50,000 4,588.75 6,720.00

60,000 6,508.75 9,620.00

70,000 8,668.75 13,020.00

80,000 10,968.75 16,920.00

90,000 13,368.75 21,170.00

100,000 15,768.75 25,620.00

150,000 28,268.75 48,620.00

200,000 40,768.75 71,620.00

300,000 65,768.75 117,620.00

500,000 115,768.75 209,620.00

1,000,000 240,768.75 439,620.00

The corporation income tax was raised by the committee from 12% to 13% The estate tax was doubled and a levy rising as high as 30% was imposed on all gifts over $3,000. A 10% tax will be collected on all amusement admissions of 25-c- or more. Telephone and telegraph messages costing from 31-c- to 49-c- will be taxed 5-c-, those costing 50-c- or more, 10-c-.

When House debate began, opposition immediately focused on the manufacturers' sales tax, the measure's backlog which the committee had imported from Canada (TIME, March 7). Anticipating popular outcry, the committee in its report argued long & hard for this new type of levy, the first ever to tax everybody in the land. The tax, it said, would not be pyramided on the retail public. Even if it were completely passed on to the consumer, which was unlikely, the $2,000-per-year man would have to pay only $15.75 more. The committee could find no other tax source which would yield money "with as little protest, as little annoyance and as little disturbance to business as a manufacturers' excise tax."

Nevertheless the sales tax split the Democratic House ranks wide open. Members repudiated the measure as a party bill, flayed it on a breach of party tradition. They vehemently argued that it was a tax upon the necessities of life, and hence upon the poor man, without regard to ability to pay. Mockingly they declared that the only thing exempt would be admission to a bread line. Some hotheads even denied the necessity of balancing the Budget by taxation at all. To each & every critic of the sales tax, secretly afraid of losing his political skin in the next election, acting Chairman Crisp calmly retorted: "Where else can you raise the necessary money?"

To that question the opposition had no good answer. One group proposed a beer tax. Another favored a system of taxes on checks, legal documents, radios, luxuries, motor vehicles et al. Sales tax objectors, however, were so vociferous that Mr. Crisp decided to prepare some "perfecting amendments" which make exemptions here & there. Secretary of the Treasury Mills hurried to the Capitol, threw the solid support of the Administration behind the tax bill.

Democratic House leaders took heart for the passage of their bill when small, lean Representative George Huddleston of Alabama, one of the most irregular and radical of their flock, uprose in its defense. Said he:

"Taxes are bad and sales taxes are particularly bad. They are levied upon poverty and not upon wealth. . . . But we have to balance the budget. . . . In that choice selection of fine spirits that meet daily in the Democratic cloakroom, known as the Demagogue Club . . . our slogan is Safety First. . . . Taxes are always unacceptable, never popular, always cost political strength. It's easy for us to vote NO. . . . Some of us just demagogue on anything that happens to come along. . . . We have our farm section . . . our oil friends . . . our beer group. . . . The soldier group of the Demagogue Club . . . is raring to take $1,800,000,000 of the people's money and distribute it among the soldiers. . . . These fellows all know they are guilty and not consistent for one-tenth of a second. . . . But it takes the combined courage and devotion of the whole people of this country to meet this emergency and I call upon my fellow Democrats to respond. . . . Do your duty by your country! Redeem your country's credit!"

Republicans joined Democrats in the applause.

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